Ulrich Bindseil, director general, market operations, ECB, yesterday (Thursday) acknowledged that there are limits to what is “reasonably purchasable” under CBPP3, noting that it is working on the assumption it will always be able to rely on PSPP to hit its Eu60bn monthly target.

Speaking at an ICMA Covered Bond Investor Council and The Covered Bond Report conference in Frankfurt, Bindseil played down the chances of the overall expanded asset purchase programme (EAPP) ending before September 2016, even if the latest inflation figures have indicated that QE may be having the desired effect.

“I think the recent updates show a movement to the right direction,” he said, “but I think we are not there to forecast that in the horizon over the next two years HICP will exceed 2%. So we are still clearly on the lower side.

“And I would say there has been a tendency, if anything, over the last years by central banks to make the mistake of overestimating upwards pressure on inflation and phasing out too early. So in view of this experience, I would say the hurdle for discontinuing the programme early is really very, very high.”

However, Bindseil noted that while the European Central Bank’s Eu60bn monthly target is set in stone, the contribution of EAPP’s three pillars – CBPP3, the ABS purchase programme (ABSPP), and the public sector purchase programme (PSPP) – is not, and that PSPP can take up the slack from ABSPP and CBPP3 if necessary.

“There is no publicly announced, pre-announced operational target in terms of buying these three asset classes,” he said. “Of course internally we – those who do the purchases – know what they should purchase, so internally there is an operational target on a monthly basis – also for the different asset classes – but it’s not communicated, so there is obviously somewhat more flexibility to change it, because only the Eu60bn has been written in stone for the period until September next year.

“So that raises of course the question looking forward: what will be the volume contributions from the three pillars? And basically, it is clear that the PSPP will be always a residual. We can take certain assumptions on what is reasonably purchasable in the ABSPP and CBPP and there should be some flexibility, while the PSPP, we rely on the assumption that the volumes there can always fill up the gap to the Eu60bn.”

Bindseil nevertheless said that while the ECB is realistic about what it can buy under the two private sector pillars – CBPP3 and ABSPP – its ambition is to maintain these and “to not easily give up or reduce volumes” so as not to rely too much or privilege the public sector.